FinTech

Joint Committee of ESAs Publishes Report on Regulatory Sandboxes and Innovation Hubs

 

On January 7, the Joint Committee of the European Supervisory Authorities (“ESAs“) (that is, the EBA, EIOPA and ESMA) published a report (JC 2018 74) on regulatory sandboxes and innovation hubs.

The ESAs set out in the report a comparative analysis of the innovation facilitators established to date within the EU, further to the mandate specified in the European Commission’s FinTech action plan, which was published in March 2018. READ MORE

Investigation of Small Business Lending Practices of Fintech Companies

 

Last year, Congressman Emanuel Cleaver II (D-MO) launched an investigation into the small business lending practices of Financial Technology “Fintech” companies, studying the various methods companies use to protect against discriminatory practices. One of the primary concerns raised by Congressman Cleaver was the specific algorithms used by Fintech firms. Click here to view the full report.

US CFTC and UK FCA Sign Arrangement to Collaborate on FinTech Innovation

 

On February 19, The US Commodity Futures Trading Commission (“CFTC“) and the UK’s Financial Conduct Authority (“FCA“) signed an arrangement that commits the regulators to collaborating and supporting innovative firms through each other’s financial technology (“FinTech“) initiatives — LabCFTC and FCA Innovate. This is the first FinTech innovation arrangement for the CFTC with a non-U.S. counterpart.

The Cooperation Arrangement on Financial Technology Innovation (“FinTech Arrangement“) focuses on information-sharing regarding FinTech market trends and developments. It also facilitates referrals of FinTech companies interested in entering the others’ market, and sharing information and insight derived from each authority’s relevant sandbox, proof of concept, or innovation competitions. Release.

European Commission Publishes Summary of FinTech Consultation

 

In March 2017, the European Commission published a consultation paper on FinTech, seeking input from stakeholders which could assist the European Commission’s policy approach towards technological innovation in the financial sector.

In total, the European Commission received a total of 226 responses, the majority from the finance industry, and a summary of the contributions provided were published on September 12, 2017.

The summary indicates that the main risks which were raised by the industry were that of cybersecurity, the use and control of data, and money laundering. With that being said, FinTech was also seen as a driver of development within the sector which created opportunities as to efficiency, cost-saving, competition, and access to finance.

A full copy of the summary is available here. The significantly longer annex, available here, provides some of the detailed responses received.

BCBS Consults on the Implications of FinTech for Banks and Supervisors

 

The Basel Committee on Banking Supervision (“BCBS“) published a consultative document (BCBS415) on the implications of FinTech for banks and their supervisors.

The BCBS set up a task force to assess how FinTech will affect the banking industry and their supervisors in the near to medium term. The consultative document focuses on future potential scenarios together with the specific risks and opportunities these may bring.

The consultative document also includes case studies on big data, cloud computing and distributed ledger technology as well as case studies on three FinTech business models (neo-banks, payment services and lending platforms).

The BCBS identified key observations and recommendations on supervisory issues to be considered by banks and bank supervisors in the light of the emergence of new FinTech business models and the rapid adoption of enabling technologies. These include the following:

  • The opportunities for supervisors to use innovative technologies;
  • Principal risks for banks resulting from FinTech developments, including cyber, compliance and operational risks;
  • Implications for the increasing use of third parties by banks via outsourcing and/or partnership arrangements; and
  • The need to ensure high compliance standards and safety without limiting innovation in the banking sector.

Comments can be made on the consultative document until October 31, 2017.

CFTC Launches LabCFTC as Major Fintech Initiative

 

On May 17, 2017, the Commodity Futures Trading Commission (“CFTC“) approved the creation of LabCFTC, which it describes as “a new initiative aimed at promoting responsible fintech innovation to improve the quality, resiliency and competitiveness of the markets the CFTC oversees.” LabCFTC will also “look to accelerate CFTC engagement with fintech and RegTech solutions that may enable the CFTC to carry out its mission responsibilities more effectively and efficiently.”

The CFTC intends for LabCFTC to be the agency’s focal point to promote fintech innovation and fair competition by making the CFTC more accessible to fintech innovators and serve as a platform to inform the CFTC’s understanding of new technologies. Moreover, the CFTC intends that LabCFTC will be an information source for the CFTC and its staff on responsible innovation that may influence policy development. For more information regarding LabCFTC click here.

The CFTC identified the following Core LabCFTC Components:

  • GuidePoint: GuidePoint is a new dedicated point of contact for fintech innovators to engage with the CFTC, learn about the CFTC’s regulatory framework and obtain feedback and information on the implementation of innovative technology ideas for the market. The CFTC believes that such feedback may include information that, particularly at an early stage, could help innovators/entities save time and money by helping them understand relevant regulations and the CFTC’s oversight approach.
  • CFTC 2.0: A new initiative to foster and help promote the adoption of new technology within the CFTC’s own mission activities through collaboration with fintech industry and CFTC market participants.

The CFTC intends that LabCFTC will facilitate:

  • Through proactive engagement with the innovator community, a better understanding in the CFTC of how new innovations interact with the regulatory and supervisory framework and identification of areas where the framework could better support responsible innovation.
  • Collaboration among the fintech industry and CFTC market participants that facilitate responsible market innovation and promote the use of technology within the CFTC; CFTC participation in studies and research that facilitate responsible innovation in the markets and promote the use of technology within the agency.
  • Cooperation with financial regulators at home and overseas.
  • Monitoring of trends and developments to ensure that CFTC’s regulatory framework supports – and does not unduly impede – responsible technological innovation.
  • Information sharing about applications of fintech, including potential use cases, benefits, risks and solutions.

Engagement with academia, students and professionals on applications of FinTech relevant in the CFTC space.

European Parliament Adopts Resolution on FinTech

 

On May 17, 2017, the European Parliament voted in plenary to adopt a resolution on FinTech and the influence of technology on the future of the financial sector. The provisional text (P8_TA-PROV(2017)0211) of the resolution has been published.

The Parliament’s Committee on Economic and Monetary Affairs (ECON) published a report on FinTech, which included the resolution, on May 3, 2017.

The Parliament has instructed its president to forward the resolution to the Council of the EU and the European Commission.

OCC Provides Additional Details to Evaluate Charter Applications From fintech Companies

 

On March 15, 2017, the Office of the Comptroller of the Currency (“OCC“) issued a “Draft Licensing Manual Supplement for Evaluating Charter Applications from Financial Technology Companies,” which provides additional details on the evaluation of national bank charter applications from financial technology (“fintech“) companies that engage in the business of banking. The supplement explains how the OCC will apply the licensing standards and requirements in existing regulations and policies to fintech companies applying for special purpose national bank charters. The supplement also describes unique factors that the agency will consider in evaluating applications from fintech companies; expectations for promoting fair access, fair treatment and financial inclusion; and the agency’s approach to supervising those fintech companies that become national banks. Release. Manual Supplement.

European Commission Publishes Speech on FinTech

 

On March 8, 2017, the European Commission (EC) published a speech that considered the challenges currently faced by the financial services sector in the EU, with a particular emphasis on FinTech.

Financial technology, commonly referred to as FinTech, has been a hot topic in recent times, with the European Commission maintaining a task force specifically dealing with it.

The speech, given by Oliver Guersent, commented on a number of points, including the need to ensure that all human interaction was not excluded and the possible investor protection risks surrounding “robo-advice.” The speech can be found in its entirety here.

OCC to Move Forward With Considering Fintech Charter Applications

 

On December 2, 2016, Comptroller of the Currency Thomas J. Curry announced that the Office of the Comptroller of the Currency (“OCC“) would move forward with considering applications from fintech companies that conduct at least one of three core banking activities (i.e., receiving deposits, paying checks or lending money) to become special purpose national banks. Fintech companies will have the option to seek a charter, and the OCC will evaluate applicants to ensure they have a reasonable chance of success, appropriate risk management, effective consumer protection and strong capital and liquidity.

The OCC simultaneously published a paper discussing the issues and conditions that the agency will consider in granting special purpose national bank charters. Comments to the paper may be submitted through January 15, 2017. For further discussion relating to the announcement, please see “National Bank Charters for Fintech Companies.” Orrick Alert. Release. White Paper.